Ishan Pandey: Hi Stella, welcome to our series “Behind the Startup.” Please tell us about yourself and the story behind Millicent?
Stella Dyer: My background has given me a unique perspective on the global financial system from both sides of the equation.
I arrived in the UK as a refugee from the Biafran War as a child. Our family was living in public housing and had very little money, but still, we had more than our friends and relatives back home. My mother would try to send over what little money she could spare, but the system was so disjointed; the fees and delays were nasty, and oftentimes payments couldn’t be made at all. The financial system is tougher for those with lesser means made me grow up with a fierce desire to carve a more prosperous future for myself.
This desire led to me earning my MBA from Harvard Business School before beginning my career on Wall Street as an investment banker with Morgan Stanley. I went on to manage the Global High Technology Investment Banking Group at Goldman Sachs before moving on to C-Suite roles with several large private equity firms.
These experiences mean that I intimately know the myriad of different ways that blockchain can improve the global financial system, but, unfortunately, we are still a long way from mainstream adoption. That’s why I founded Millicent: to overcome the remaining roadblocks and deliver an open, accessible, and equitable financial infrastructure with the potential to—quite literally—change the world.
Ishan Pandey: Can you please explain to our readers what Directed Acyclic Graph means in the crypto ecosystem and how exactly does it work?
Stella Dyer: Directed Acyclic Graph (DAG) is a more recently developed distributed ledger technology, offering faster finality and higher scalability than traditional blockchain designs.
In a blockchain, individual transactions are grouped into blocks that wait to be validated as a batch. DAG does away with this batch processing, so the transactions are asynchronously processed as soon as they come into the system.
To put it simply, where a blockchain diagram looks like a linear sequence of blocks in a chain, a DAG looks more like a tree of transactions, branching out and growing.
Rather than a “pure” DAG like Nano that doesn’t support smart contracts, Millicent has developed a hybrid system using a DAG-based asynchronous Byzantine Fault Tolerant (aBFT) consensus engine paired with a blockchain created with the Cosmos SDK. The consensus is incredibly fast and secure, with the leaderless aBFT doing away with the risk of transactional front-running, while the Cosmos-based chain offers secure smart contracts in Rust and the incredible interoperability of Cosmos InterBlockchain Communication (IBC).
Our platform really is the ideal system for a global payments infrastructure. By default, most Cosmos chains have 6-second block times which—compared to Bitcoin or Ethereum—is extremely fast. However, in a real-world setting, all of those 6-second delays add up quickly. Imagine waiting in line in a busy coffee shop and everyone in front of you takes 6 seconds longer to pay. Those 6 seconds can quickly compound and result in you missing your train. With our platform’s DAG-based system, transactions are finalized in an average of just 0.9 seconds.
Ishan Pandey: Please tell us a little bit about Millicent and this government-backed first-mover stablecoin?
Stella Dyer: Some people don’t like it, but regulation of the crypto-asset space is inevitable, in some shape or form. My view is that it is better to work with the powers that be, helping them shape their opinions, rather than taking a confrontational approach that could result in more restrictive regulations.
Because blockchain is such a fast-moving space, it can be difficult for entities that aren’t solely devoted to it to get ahead of the curve; that’s why education and assistance from industry members are invaluable to help shape future narratives. That’s precisely what we achieved with our winning government grant proposal, becoming the first stablecoin and Central Bank Digital Currency (CBDC) project to receive UK public funding.
The technical novelty of our DAG-based hybrid blockchain was a key element of our funding, but breaking the overall financial systems down to their most basic components—detailing the flaws in the current system, precisely elaborating how they could be improved upon, and showcasing the immense benefits our system will bring to the wider public—is what got us over the line.
The UK is well known as a global fintech hub, and with the Bank of England researching CBDCs, private firms such as ours need to showcase different approaches to a very complicated subject. We’re fortunate that the relevant bodies in the UK both understand and embrace this public-private collaboration.
Ishan Pandey: An old, inadequate, and scattered infrastructure underpins the existing global financial system. How can blockchain and crypto assets effectively resolve these issues?
Stella Dyer: At this point, it’s almost cliché to say that the traditional financial system is outdated, but it’s much worse than most people think. 70-80% of all financial transactions pass through siloed mainframe computers running a 60-year-old programming language called COBOL.
Because these systems were originally designed for a paper-based world, they have difficulty interfacing and require multiple intermediaries to complete even the most simple transactions. Of course, each of these intermediaries adds delays and fees to every step.
What seems like a simple credit card transaction to a consumer is very drawn-out behind the scenes, involving at least five different parties, incredibly high fees, and settlement delays that impact merchant cash-flows. These fees are also passed on to the consumer in the form of inflated purchase prices.
Here in the UK, it has gotten to the point where Amazon publicly announced that they were no longer accepting VISA credit cards due to the high fees. They were eventually able to resolve their differences, but most businesses don’t have the kind of bargaining power that Amazon does and remain subject to the demands of the card network duopoly.
Cross-border correspondent banking systems suffer from similar drawbacks, with the global average remittance fee sitting at nearly 7%. These payment flows are vitally important to the world’s poorest countries—immigrant workers send over $700bn a year home to help their friends and families, outweighing all of the world’s official foreign aid programs combined.
The G20 nations have pledged to bring remittance fees down to 3% by 2030, and the United Nations has stated that better remittance payments would help achieve 7 of the 17 Sustainable Development Goals. In my opinion, leveraging blockchain is the best—and possibly only—way to make this happen.
Blockchain technology’s broad accessibility and peer-to-peer nature, combined with the fast settlement and lower fees of newer chains, clearly offer significant advantages to the traditional financial system. However, there are still some hurdles to overcome, namely: scalability, interoperability between different blockchains, and regulatory compliance for digital currencies. Ours is the only platform that will deliver on all of these aspects.
Ishan Pandey: Within the financial sector, where a significant number of people and organizations now interact with stablecoins, from a futuristic perspective, do you think CBDCs could play a role in promoting financial stability within the system?
Stella Dyer: CBDCs are an incredibly complex proposition which is why, although over 80% of the world’s central banks are researching CBDCs, we have yet to see many leading economies jumping in with both feet.
The balance between the central bank and commercial bank money is delicate. It is possible that an ill-designed CBDC could actually pose a lot of risk to existing financial institutions and, therefore, the economy. This is one of the reasons why many central banks see it as more important to be right, rather than to be first when it comes to CBDC.
Of course, there are many other considerations at play for a retail CBDC, not least of which is the balance between user privacy and the right to full custody of one’s assets with Know Your Customer (KYC), Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) regulations.
The end design of a CBDC must balance many factors. Still, unlike in China, we feel that most central banks will opt for a hybrid distribution system with private institutions issuing tokens backed by central bank reserves to their customers, rather than the central bank itself dealing directly with end-users. This system most closely resembles the operational functionality of the current banking system and can also help alleviate many user concerns about the potential over-reach of centralized authorities.
Millicent’s suite of stablecoins are based around these same principles, backed 100% by liquid assets, offering the lowest risk while maximizing financial stability, user privacy, and the ability for self-custody. When central banks choose to issue CBDCs in the future, they will find that our platform already has an easily adaptable, field-tested infrastructure that can be leveraged.
Ishan Pandey: When it comes to the crypto ecosystem as a whole, there’s a lot of regulatory uncertainty, especially when it comes to stablecoins and cryptocurrencies. According to you, should DeFi be regulated?
Stella Dyer: Yes, and no.
I’m a firm believer in individual freedoms. If someone is comfortable using an unregulated system, they should have every right to do so—as long as the risks are presented to them—much as they are free to play roulette, or place a bet on a football game, both of which are completely legal across the UK.
However, as an industry, we need to realize that for DeFi to reach the mainstream, we are going to need safeguarded protocols as well. For the average person—let alone financial institutions—navigating a myriad of anonymous teams, potential rug pulls, and regulatory complications make DeFi impossible to interact with. We won’t see many pension funds touching DeFi until we can offer them a safer playing field. The potential reward isn’t worth the risk when playing with high stakes.
Of course, this doesn’t mean that DeFi should be regulated in the same way as traditional finance. We must always ensure open access for everyone and protect the freedom of continuous innovation to push the space forward.
Ishan Pandey: What does the roadmap ahead look like for the blockchain ecosystem as a whole?
Stella Dyer: For Millicent, we’ll soon be supplementing our grant funding with a Seed Round of investment, allowing us to add to our outstanding team and accelerate our time to market.
For the industry as a whole, I think we’ll start to hear a lot more about stablecoins, CBDC and regulations this year, all of which says to me that we are well on the path to the mainstream adoption of digital currencies and assets.
Disclaimer: The purpose of this article is to remove informational asymmetry existing today in our digital markets by performing due diligence, asking the right questions, and equipping readers with better opinions to make informed decisions.